NECESSITY, FUNCTION, AND CONFORMITY:
KRS 349.115 authorizes the Department for Natural Resources to promulgate all
rules, administrative regulations, and amendments to implement the provisions
of KRS Chapter 349, governing coal bed methane wells. KRS 349.110 requires the
department to exercise supervision over the drilling, casing, plugging, and filling
of all coal bed methane wells. This administrative regulation establishes the
requirements for permitting directional and horizontal wells.

Section 1. Definitions. The definitions
in KRS 349.010 and the following additional definitions shall apply to this
administrative regulation:

(1) "Abnormal pressure" means
a reservoir pressure that exceeds the hydrostatic pressure of fresh water
extending from the reservoir to the surface.

(2) "Annulus" means the space
between two (2) strings of casing or between a string of casing and the bore
hole wall.

(3) "Blow-out preventer" or
"BOP" means a device installed on the surface or intermediate casing
to prevent the escape of pressure either in the annulus between casing and
drill pipe or in the open hole without drill pipe and which is used during
drilling operations.

(5) "Cement" means hydraulic
cement properly mixed with water or with additives approved by the director,
and which is used to fill the annulus of casing string or to plug the well.

(6) "DES" means the State
Disaster and Emergency Services Office, under authority of the Department of
Military Affairs in Frankfort, Kentucky, with regional offices throughout the
commonwealth.

(7) "Directional and horizontal
drilling" means the science of directing a well bore along a predetermined
course to a "target" located a given distance from the vertical.

(8) "Directional survey"
means a survey taken while drilling, using continuous measuring technology, or
a survey made through drill tools at intervals to accurately determine the
location of the deviated well bore.

(9) "Intermediate casing"
means one (1) or more strings of pipe installed in a well in addition to the
surface casing in which each string is smaller in diameter than the previous
one.

(10) "Intersection length"
means the horizontal distance between the point at which the well penetrates
the top of the intended formation and the end point within that formation.

(11) "Long casing string"
means the last casing installed in a well to be used for production or
injection purposes.

(12) "Measured depth" means
the total depth measured in the well from the surface.

(13) "Surface casing" means
the first and largest diameter casing installed in a well; its primary uses are
to make the bore hole stand up and to protect fresh water zones.

(14) "True vertical depth"
means the depth of the well from any point in the well being measured to the
surface of the ground above the point being measured.

(15) "Zone" means a layer of
strata capable of producing or receiving fluids.

Section 2. Permit Requirements. Prior
to drilling a directional or horizontal well, the applicant shall submit the
following information:

(1) An application for a permit to
drill the well, with a cover letter from the applicant, shall be filed on Form
CBM-2, as incorporated by reference in 805 KAR 9:020. A bond as required in KRS
349.120 and an application fee of $300, pursuant to KRS 349.040(3), shall be
submitted with the application.

(2) Three (3) copies of a location plat
satisfying the requirements of 805 KAR 9:020 (plan view), in addition to the
following requirements:

(a) The surface location and proposed
target formation identified by the Carter Coordinate system, latitude and
longitude, and the single zone state plane coordinate system;

(b) The proposed course of the well;
and

(c) The identification of the
intersection length of the proposed well and the proposed producing formation.
To avoid any conflicts with applicable well spacing requirements, a dashed line
shall be drawn around the intersection length with regard to the spacing requirements
in KRS 349.075. This distance shall be clearly shown in feet.

(3) In addition to the plan view
required in this section, the operator shall submit three (3) copies of a plat
which shows a vertical cross-section view of the area to be drilled by the
well. This cross-section shall be prepared from the proposed "predrill
hole" directional survey compiled by the contractor responsible for the
directional control mechanism and certified as required by 805 KAR 9:020. The
cross-section shall include the proposed course of the well from the well site
to the target. The surface shall be located as zero in reference to the depth
and the lateral distance from the well site and true vertical depths shall be
shown for all of the following:

(a) The kick-off point or selected
depth at which the deviation is started;

(b) The known coal seams to be
intersected;

(c) The producing interval(s);

(d) The proposed producing
formation(s); and

(e) The proposed target.

(4) If the permit is issued, the
operator shall provide verbal or written notice to the department field
inspector at least forty-eight (48) hours in advance of the commencement of
drilling operations.

(5) The following shall be submitted
within ten (10) days from the date of the well’s completion:

(a) Three (3) copies of an amended plan
view of the well location plat required in subsection (2)(a), (b), and (c) of this
section, with the actual course drilled, the kick-off point and the actual
target superimposed on the proposed well location plat. A correction in the
target Carter Coordinates, latitude and longitude, and the single zone state
plane coordinate system, if necessary, shall then be recorded by the
department;

(b) Three (3) copies of the side or
cross-sectional view plat for the actual path of the well required in
subsection (3)(a) through (e) of this section, shall be amended to indicate the
actual formation(s), coal seams, target, kick-off point; and

(c) Copies of all directional surveys
certified by the operator and the contractor responsible for the directional
survey. This survey shall be submitted for the entire well bore, and the
operator shall be able to identify the path or depth of the well bore at any
time during and after the drilling of the directional or horizontal well. The
survey points shall be made at each tool joint or at any closer intervals.

(6) The operator shall satisfy
applicable spacing requirements of offset mineral boundary lines and between
wells for the actual drilled course of the well, its end point, the
intersection of the well bore and the producing formations.

(7) The operator shall provide to all
coal operators or owners affected by the drilling of a directional or
horizontal well a copy of the predrill plat and cross-section plat described in
subsections (2) and (3) of this section as required by KRS 349.015 for coal bed
methane plats. Within ten (10) days after the well is drilled, the operator
shall submit to the coal operator or owner the revised plats and deviation
survey log required in subsection (5) of this section.

Section 3. Blow-out Prevention. The
operator shall install a blow-out prevention device capable of withstanding a
working pressure of 1500 psi and a test pressure of 3000 psi. This BOP equipment
shall be tested at intervals necessary to maintain its ability to operate at
rated capacity. The results of these tests shall be kept at the drill site and
made available to department personnel at their request.

Section 4. Operator Noncompliance. An
operator in noncompliance with the requirements of this administrative
regulation is subject to the penalties established in KRS 349.155.